Thank you very much! Capital spending Sales of property, plant and equipment Acq
ID: 2586849 • Letter: T
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Thank you very much!
Capital spending Sales of property, plant and equipment Acquisitions and investments in noncontrolled affiliates Reduction of cash due to Venezuela deconsolidation Divestitures Short-term investments, original matunty more than three months, purchases Short-term investments, original maturnty more than three months, maturities Short-term investments, original maturity three months or less, net Other investing, net (3 .040) (2.758) (2859) (2 .795) 2.714) 212) (88) 203 6,305) 3391 76 (12,504) (4 428) 8,399 (3,005) 5,999 2 449) (3,569) (4,937) 3855 (2,625) 4,195 3,894) Net cash used for investing activities Proceeds from issuances of long-term debt a Payments of long-tem debt Debt repurchase a Short-term borowings, original maturity more than three months, proceeds Short-term borrowings, original maturity more than three months, payments (4 095) 2,504) 50 23 (452) 1,634 3,434) d Short-term borrowings, original maturity 1,505 2,037) (1,762) three months or less, net (4040) 5 000) (4,227) 3,000) 466 3,730) (5,012) 3305) (3 219) Cash dividends paid Share repurchases, commorn Share repurchases, preferred Proceeds from exercises of stock options Excess tax benefits from share-based payment arrangements Acquisition of noncontrolling interests Other financing 504 755 133 (2,942) 0264) (3,789) (3,306) Net cash used for financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equiralents, beginning of (3.828) 221) 2,962 6,134 9,096 62 (3,241) 9375 6,134 3,078 2,230 9,096 6,297 Cash and cash equivalents, end of year 9,158 9,375 6,297Explanation / Answer
The two major investing activities which are employed by the company are Purchases of Short term Investment and Capital Spending whereas the two major financing activities are repurchases of shares and issue of long term debts. The company has gradually reduced and ceased the activities relating to purchase of short term investments. In the third year, the company had negative cash flows due to maturity of short term borrowings but after that year, the company has had positive cash flows due to sound business strategy.
As far as company’s investing strategy is concerned, the company has made a change in the strategy from the end of 3rd year whereby it ceased to invest in Short term Investments and the company seems to increase its activities in acquisition of other affiliates and divestures.
The company’s strategy to issue long term debt and use that amount in repurchasing its own shares is not viable in long term as it would lead to a dangerous Debt Ratio and Debt Equity Ratio. It would gradually increase the company’s financial risk and will reduce the shareholders’ trust in the working of the company. The company has regularly been paying a high cash dividend to maintain the level of attractiveness towards company’s share. But for the overall growth of the company, the financing strategy employed by the company is not viable.
The cash levels of the company yare maintained more or less at the same level but for the 3rd year from where the company changed its policy. Hence we can say that the overall cash flows of the company are being effectively managed.
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